NEW YORK -- Bargain hunting extended Wall Street's rally to a second session Tuesday, lifting stocks to their highest level in two weeks. Investors were also encouraged by some positive corporate news.
Analysts said many investors were willing to buy on bets that a war with Iraq might not be imminent after all. News that the terror alert warning might be lowered soon also contributed to the advance.
"We're primarily having a technical bounce from an oversold condition," said Todd Clark, head of listed equity trading at Wells Fargo Securities. But he added that there still remains too much uncertainty about a war with Iraq to allow for a continued advance.
"We're probably going to be pulling back a little bit. There's still fog in the horizon," Clark said.
The Dow climbed 132.35, or 1.7 percent, to close at 8,041.15, having gained 0.6 percent last week to snap a four-week losing streak. It was the highest level since Feb. 3, when blue chips closed at 8,109.82. Financial markets were closed Monday for the Presidents Day holiday.
The broader market also finished sharply higher. The Nasdaq composite index rose 36.37, or 2.8 percent, to 1,346.54, after climbing 2.2 percent last week. The Standard & Poor's 500 index gained 16.28, or 2 percent, to 851.17, following a weekly advance of 0.6 percent.
Heinz climbed 37 cents to $31.65 after the food maker reaffirmed its fiscal 2003 forecast.
Investors appeared to be less anxious that a war would begin soon with Iraq after Saddam Hussein's government agreed to allow an American U-2 plane to fly over its territory as part of the U.N. weapons inspection of the country. A majority of Security Council members led by France have resisted an immediate war and called for inspections to continue.
Concerns about war and its effect on the U.S. economy killed the market's New Year's rally and sliced 1,000 points off the Dow industrials in recent weeks.
Meanwhile, over the weekend, Homeland Security Secretary Tom Ridge said the current terrorism threat level will likely be lowered from its current high-risk, or orange, status sometime in the future.
"I do believe the war scenario has already been discounted in the market," said Mark Donahoe, managing director at US Bancorp Piper Jaffray in Minneapolis, adding that he believes "it's not a question of 'if,' it's just 'when."'
Stephen Massocca, president of Pacific Growth Equities, said he believed the fact that war seemed less immediate allowed investors to realize that the economy wasn't doing too badly.
"We had some decent economic numbers coming out last week that was digested over the weekend on industrial production and unemployment claims," he said. "That in combination with the market in an oversold state set up" a rally.
Massocca also questioned the sustainability of the market's recent rally, noting that trading was particularly light on Tuesday as much of the Northeast dug out from a massive snowstorm.
"I would like to see more volume in these rallies. We haven't seen that, leading me to believe that this might be a temporary rally," he said.
Microsoft climbed 81 cents to $24.96 after the software maker's 2-for-1 stock split.
Oracle rose 72 cents to $12.42 after the software company announced a deal with telecom equipment maker Nokia to mobile phone users to access e-mail and other corporate data. Alcatel climbed 42 cents to $8.
Zale gained 77 cents to $30.01 after the jewelry retailer posted fiscal second-quarter results that were in line with expectations.
Advancing issues outnumbered decliners 5 to 2 on the New York Stock Exchange. Volume was light.
The Russell 2000 index, which tracks smaller company stocks, rose 6.03, or 1.7 percent, to 364.53.
Overseas, Japan's Nikkei stock average finished 0.9 percent lower Tuesday. In Europe, France's CAC-40 rose 2 percent, Britain's FTSE 100 gained 1 percent and Germany's DAX index advanced 1.2 percent.
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